Graham (Alexander) & Company v United Turkey Red Company Ltd
| Jurisdiction | Scotland |
| Judgment Date | 10 June 1922 |
| Date | 10 June 1922 |
| Docket Number | No. 71. |
| Court | Court of Session |
Ld. Anderson, Lord Justice-Clerk (Scott Dickson), Lord Salvesen, Lord Ormidale, Lord Hunter.
ContractBreachAgent and PrincipalAgent's right to commissionBreach of contract by agentRight to commission for period prior to breachAccounting.
A contract, entered into in February 1914 between a firm and a commission agent, whereby the latter was appointed agent for the sale of certain cotton goods dealt in by the firm, contained a clause prohibiting the agent from selling such goods supplied by others than his principals. From 10th July 1916 onwards the agent regularly sold goods of that class on behalf of another firm, and he also bought and sold such goods on his own account. In November 1917 the agent terminated the contract, and brought an action of accounting against his principals for the balance of commission alleged to be due to him in respect of the whole period of his agency. In defence to the action the principals pleaded the agent's breach of the condition of the contract.
Held (rev. judgment of Lord Anderson) that the agent was not entitled to an accounting for the period subsequent to 10th July 1916, as he was then in material breach of his contract and therefore could not sue upon it, but that he was entitled to an accounting for the period prior to that date during which he had duly obtempered the contract.
Observed (per Lord Salvesen and Lord Ormidale) that any claim competent to the agent for remuneration for the period subsequent to the breach would be a claim, not for quantum meruit the agent, but for quantum lucrati the principals.
Authorities, dealing with the rights of parties following on a breach of a material condition in a contract, examined.
On 14th December 1917 Alexander Graham & Company, merchants and general agents, Glasgow, brought an action against the United Turkey Red Company, Limited, Glasgow, concluding for decree ordaining the defenders to produce an account of all orders received by them from customers introduced by the pursuers and of all such orders implemented by them and of the whole commission earned by the pursuers in terms of the agreement entered into between the pursuers and the defenders by letters dated 26th February and 2nd March 1914, with the extension or continuance thereof contained in the letter written by the pursuers to the defenders dated 12th December 1916, whereby the true balance due by the defenders to the pursuers may appear and be ascertained by our said Lords, and, failing an accounting, for payment of 5000 as the balance of their commission, and also for payment of 5000 as damages for breach of contract. The commission sued for included certain over-prices,i.e., additional commissions claimed by the pursuers, consisting of the excess of the price obtained from the customer over the prices quoted by the defenders to the pursuers. That item and the claim for damages were abandoned by the pursuers before the Lord Ordinary and in the Inner House.
The facts of the case, as established at a proof, were as follows:
The pursuers, of whose firm Alexander Graham was the sole partner, acted for a number of years as agents for the defenders, whose goods they sold on commission. The parties entered into a contract of agency which was constituted by the following letters:
Pursuers to Defenders.
26th February 1914.
I beg to offer my services for selling and developing your productions under the following terms, viz.:
1. I shall confine myself solely to your productions with the exception of styles and goods which at present you do not produce, but which, whenever you are ready to do so, will be transferred to you.
2. To this end I undertake to visit Manchester, Liverpool, and London at least once a quarter, and Hamburg, Amsterdam, Paris, and Berlin at least once a year.
3. In return for the orders I may place with you, a minimum Commission of 21/2 per cent to be placed to my credit, and in special lines a Commission to be agreed upon from time to time; also a fee of One Hundred Pounds per annum, and an allowance for Travelling Expenses of One Hundred Pounds per annum.
4. On account of the special circumstances in which I am placed and which are known to you, payment of One Hundred Pounds to account will be necessary, at present, and will be highly appreciated.
5. Should you kindly agree to these terms, I am willing to come under an agreement for a number of years, if you so desire.
I feel sure that I shall be able to develop and secure for you much valuable business, and if an arrangement is made I shall give to your business all the attention and devotion that lies in my power.
Awaiting your reply.
Defenders to Pursuers.
2nd March 1914.
We now beg to formally accept the offer of your services contained in your favour of 26th ultimo.
We propose that the Agreement should be for the term of three years, and date from 28th February 1914, with a break in our option at the end of one year from that date.
Kindly acknowledge this and oblige.
That contract was subsequently cancelled, and a fresh contract was entered into, the terms of which were embodied in the following letter:
Defenders to Pursuers.
12th December 1916.
We beg to confirm the fact that our agreement of 26th February 1914 is hereby cancelled, and the following agreement substituted:
1. It is understood between us that all cotton goods handled by you or offered by you for sale will be the production of The United Turkey Red Company, Limited.
2. We have mutually agreed that the maximum commission shall be 5 per cent (Five per cent) on Handkerchiefs and 21/2 per cent (two and a half per cent) on other commission goods, but on special lines another rate can be agreed on from time to time. Out of the proceeds of this commission one per cent of the nett Invoice Values shall be retained by us monthly and placed to your credit. 5 per cent (five per cent) interest will be allowed on such monies, calculated every six months. This account is created in order to meet bad debts. When the nett total at credit of this account reaches 2000 (Two thousand pounds stg.) the retaining of this one per cent shall be suspended until such time as bad debts may cause the total amount to be less than 2000, which must again be built up to 2000.
3. We guarantee to supply you with a season ticket to London, Liverpool, and Manchester, dating from to-day, and to maintain it in force during the currency of this agreement.
4. This agreement to be for five (5) years from to-day's date and thereafter to continue in force subject to six months' notice by either party.
5. We accept your offer to hand us your present allowance for travelling expenses for December 1916 and January 1917, equal to 16, 13s. 4d., which will be placed towards payment of new season ticket.
In or about July 1916 the pursuers entered into an agreement with Elia Torres, calico printers, Manchester, to represent them as their agents in London for the sale of cretonnes at agreed rates of commission. From that date until, at least, 1917, the pursuers sold goods produced by Torres. They also sold, both as agents and as merchants, the goods of other manufacturers. These were cotton goods such as the defenders produced. The pursuers were thus in material breach of their agreements with the defenders of 1914 and 1916. The defenders paid the pursuers commission on business done by them up to the end of December 1917.* Before that date disputes had arisen between the parties, and the pursuers on 26th November 1917 terminated their agreement with the defenders on account of alleged breaches thereof by the defenders. The breaches alleged included failure to pay the commission due, and restriction of the pursuers' area of operations. The defenders, who were by this time aware that the pursuers had been acting in breach of their contract, refused to make any further payment of commission pending the determination of the questions at issue.
The pursuers pleaded, inter alia;(1) The pursuers having
sold goods on commission for the defenders, are entitled to decree of count and reckoning as concluded for. (2) Failing production by the defenders of the accounts called for, the pursuers are entitled to decree for the sum in that event concluded for.
The defenders pleaded, inter alia;(1) The pursuers' averments being irrelevant and insufficient to support the conclusions of the action, the same should be dismissed. (2) The pursuers being in breach of their contract with the defenders, are barred from pursuing the present action, which should be dismissed.(4) The defenders, having accounted to the pursuers for all commission presently due to them under the contract sued on, are entitled to absolvitor.
After sundry procedure, including a proof before answer under reservation of all questions of accounting, the Lord Ordinary (Anderson) on 20th July 1921 sustained the first plea in law stated for the pursuers, repelled the first, second, and fourth pleas in law for the defenders, appointed the defenders to lodge accounts, and granted leave to reclaim.
Lord Anderson'sopinion.I have found the decision of this case to be attended with considerable difficulty, but I have reached the conclusion that the pursuers are entitled to the accounting which they crave. Their position, as ultimately formulated by their counsel, appears to me to be eminently reasonable. By their action they conclude for (1) damages for breach of contract, (2) accounting for and payment of commission earned and unpaid, and (3) accounting for and payment of what have been termed over-prices, that is, prices obtained by the pursuers for the defenders' goods in excess of the selling lists of the defenders.
[His Lordship referred to the claims for over-prices and for damages, which were abandoned]All that the pursuers now ask for is an accounting for commission admittedly earned. The defenders concede that they hold at least 300 of such commission. The...
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